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I posted this here: http://slashdot.org/comments.pl?sid=1318879&cid=28869075 and decided I liked it so much, I wanted to save it, and point to it every time someone starts saying that we shouldn't have regulation of blah blah blah.

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In a TRULY free market, the government wouldn't have power to establish currency, protect ownership, extend licensure... all sorts of things that the economy depends on.

The "hypothetical free market" requires perfect information, perfect competition, and perfect mobility. As none of these are feasible to attain, government regulation is required to simulate them or compensate for their lack. For example, legal definitions of what "organic" produce is, and establishment of certifying bodies (which are private enterprises, but have some sort of charter or something from the government that establishes their certification as adequate for usage of the term "organic") help compensate for the lack of perfect information about farming practices. Without them, someone could say "Yeah, my produce is organic!" after spraying it with tons of pesticides, and you wouldn't really have any way of verifying that unless you traveled out to their farm yourself and watched them for a while... or brought your own lab kit to the market.

So, markets that work on the scale we expect them to will always require SOME amount of regulation, and insofar as there is such regulation, there will be disagreements about how that regulation should be put in place. Some methods would favor the producer or the consumer. Hence, there's a business interest in attempting to shape the regulatory process.

I'm all for making lobbying illegal... but that, some say, is over-regulating the market.

Actually, it's government regulation that requires perfect information. When there's a single entity regulating the business of an entire society, that entity would need perfect information about all aspects of society in order to achieve the optimal regulation. This is what's known as the 'economic calculation' problem, and it's part of the reason centrally planned economies are weak ones.

On the other hand, if property rights are respected, each individual is free to choose how best to utilize his own a

Adam Smith is who said that perfect information was one of the three essential elements of the self-regulating free market. I didn't make it up.;-)

But I do agree with him. Without any regulation of the provision of information, actors in a free market are motivated to hide anything negative or make false statements that are positive about their product. If it is discovered that they are lying, well, then, that will ruin their reputation, right? Except... how do I find out that such-and-such company was